Ministry looks to short-term G-bonds

Update:
July, 02/2015 - 10:12

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Ha Noi Stock Exchange staff conduct check-ups on and supervise G-bond auctions. Only VND82 trillion (US$3.83 billion) in G-bonds above a five-year term were issued in the first half of the year, down 26 per cent against the same period last year.— VNA/VNS Photo Hoang Hung

HA NOI (VNS) — The Ministry of Finance plans to ask the National Assembly for permission to focus on the issue of five-year Government bonds instead of those with longer terms as originally planned.

A report in the Dau tu (Investment) newspaper said the move stemmed low demand for bonds that have terms longer than five years, which has hindered capital mobilisation for the State Budget.

Statistics compiled by the ministry shows that just VND82 trillion (US$3.83 billion) worth of G-bonds with terms exceeding five years were issued in the first half of the year, down 26 per cent against the same period last year.

The ministry said if its proposal is approved, it would also help enhance the management of public debt, ensuring that it does not exceed the permitted 65 per cent of the GDP.

The ministry's proposal also asks the Government to initiate more measures to boost long-term borrowing at home and abroad to be able to balance the State budget.

According to Resolution 78/2014/QH13 issued by the National Assembly last year, from 2015, the Government can only issue long-term bonds with terms of more than five years. The resolution also prohibits short-term borrowings to offset overspending.

The resolution was passed in the context of widespread concerns over rising public debt. The National Assembly decided that it is necessary to tighten Government borrowing.

However, the measure has made it very difficult for the finance ministry to mobilise capital for State spending. Many G-bond issues have failed this year, and analysts have attributed this to the lack of short-term bonds for investors to choose from.

The Thoi bao kinh te Sai Gon (Sai Gon Times) newspaper recently quoted economists as saying that the measure was ‘quite unreasonable'. They said that it was the finance ministry's job to calculate how much money the State Budget needs and how much to borrow. It was also the ministry's brief to define the terms of government bonds that have to be issued to optimise use of borrowed funds.

The newspaper quoted finance expert Le Hong Giang as saying issuing bonds with different terms of maturity not only helps optimise the use of borrowed money but also facilitates the creation of interest rate curves and improved efficiency of monetary policies.

The report cited another finance expert, Huynh The Du, as saying G-bonds with different terms can serve as important instruments for the Government to regulate the financial market. — VNS